Three “seismic” shifts in the global economy are identified: (1) a persistent dampening fallout from the property bubbles, busts, and the ensuing financial crises; (2) information communication technology becoming employment-unfriendly; and (3) shift from the demographic bonus phase of young and growing population to the demographic onus phase of aging population. These seismic shifts have both short-run and long-run effects, with strong policy implications. Firstly, aggregate demand is generally weaker. Moreover, aggregate demand becomes less responsive to traditional macroeconomic stimulus. Secondly, many economies are losing flexibility and thus efficiency is declining. Thirdly, since conventional monetary policy turns out to be less effective, central banks are increasingly reliant on using central bank balance-sheets (unconventional policies) as a stabilization device. Lastly, and most importantly, uncertainty is particularly heightened. This heightened uncertainty poses a serious challenge to policy makers.
Cette recherche est financée par la Japan Society for the Promotion of Science, KAKENHI Grant Number 25220502.